Auditing Exam Answer
Key
Course Introduction
Auditing is a comprehensive course that explores the principles, procedures, and practices of examining financial statements and ensuring their accuracy and compliance with established accounting standards. The course covers the audit process from planning to execution, including risk assessment, gathering evidence, internal control evaluation, and documentation. Emphasis is placed on ethical considerations, legal responsibilities, audit reporting, and the use of auditing software. Students will develop analytical and critical-thinking skills necessary to detect errors, fraud, and ensure transparency, ultimately preparing for roles in public accounting, government, or corporate auditing environments.
Recommended Textbook
Ethical Obligations and Decision Making in Accounting Text and Cases 4th Edition by Steven Mintz
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8 Chapters
624 Verified Questions
624 Flashcards
Source URL: https://quizplus.com/study-set/2603 Page 2
Chapter 1: Ethical Reasoning: Implications for Accounting
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88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/51867
Sample Questions
Q1) Describe a situation you have encountered in your personal life where you did not follow the law because you judged another alternative to be more ethical.Don't use the example in the text of driving on a two-lane divided roadway.Why did you decide to do that act?
Answer: Sometimes in natural disasters like a fire,flood,hurricane a person might break-in and enter a house to look for and rescue the occupants. Look for the reasoning behind a student's answer to evaluate the appropriateness of the action.
Q2) The method of ethical reasoning that evaluates actions in terms of harms and benefits is:
A)Act Utilitarianism
B)Rights Theory
C)Justice
D)Virtue
Answer: A
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Chapter 2: Cognitive Processes and Ethical Decision
Making in Accounting
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65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/51866
Sample Questions
Q1) Which of the following characteristics is NOT part of the behavioral approach,Giving Voice to Values?
A)Used post-decision-making
B)Capacity to express one's values
C)Employs traditional philosophical reasoning
D)Counteracts reasons and rationalizations
Answer: C
Q2) The ethical conflict in A Team Player can be described as:
A)There is no conflict; Barbara and Diane both identify the deficiency.
B)The conflict is between Diane and the rest of the audit team on whether there is a deficiency.
C)The conflict is between Barbara and Haley,and the rest of the team as to whether or not to take the deficiency to Jessica,the audit senior.
D)The conflict is between Barbara and the rest of the team as to whether or not to take the deficiency to Jessica,the audit senior.
Answer: C
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4
Chapter 3: Organizational Ethics and Corporate Governance
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/51865
Sample Questions
Q1) Backdating of stock options is unethical because:
A)It favors top executives over other company employees with respect to the number of options
B)It purposefully manipulates the option criteria that determine their value
C)It changes the exercise price on options to benefit top executives
D)It changes the exercise date on options to benefit top executives
Answer: B
Q2) The business judgment rule refers to:
A)Faithfulness to one's obligations and duties
B)Honesty of purpose and caring
C)Decision making under uncertainty
D)Acting with due care and good faith
Answer: D
Q3) The most important element of a high ethics organization would be:
A)Acting in accordance with self-interest
B)Having a credo and mission statement
C)Having a mission statement,values,and ethical code
D)Acting opposite of stated values,ethics and mission
Answer: C
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Chapter 4: Ethics and Professional Judgment in Accounting
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100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/51864
Sample Questions
Q1) The due care principle in the AICPA code:
A)Addresses the quality of the individual who performs professional services
B)Addresses the quality of services performed by the CPA
C)Addresses whether the independence standards have been met
D)Addresses whether integrity and objectivity have been compromised
Q2) The M&A Transaction case focuses on:
A)Whether merger and acquisition services should be provided for an audit client
B)Whether merger and acquisition services should be provided for a tax client
C)Whether a merger should go through between two audit clients
D)How to record M&A transactions
Q3) Why do CPAs have to be aware of ethical conflicts in performing professional services and which rules of conduct are most directly affected by the evaluation? How do CPAs assess risks due to ethical conflicts and possible impairments of the rules?
Q4) The AOL-Time Warner case deals with:
A)Whether the merger of two large telecommunications companies should be allowed
B)Recording round-trip transactions as revenue in one year and an expense in a later one
C)Recording expenditures as capital costs rather than operating expenses
D)Whether a whistle-blower was a hero or villain
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Chapter 5: Fraud in Financial Statements and Auditor
Responsibilities
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80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/51863
Sample Questions
Q1) Which of the following is NOT an element of the auditor's responsibility of the AICPA's auditor's report?
A)States the auditor's responsibility to express an opinion on the financial statements
B)States the audit provides reasonable assurance that the statements are free of material misstatement
C)States audit provides reasonable basis for the opinion
D)States the audit evaluates the overall financial statement presentation
Q2) When would it be appropriate for an auditor to withdraw from an engagement?
A)In order to avoid issuing an adverse opinion
B)When that auditor cannot observe the taking of inventory or is unable to confirm receivables
C)When the auditor concludes that management cannot be trusted
D)When the auditor has overbooked too much work
Q3) Which of the following is an element of ERM?
A)Reducing operational surprises and losses
B)Aligning risk appetite and whether fraud has occurred
C)Control environment
D)Audit risk assessment
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Chapter 6: Legal, Regulatory, and Professional Obligations of Auditors
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81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/51862
Sample Questions
Q1) The legal precedent that evolves from legal opinions issued by judges in deciding a case and guides judges in deciding similar cases in the future is referred to as:
A)Business law
B)Tort law
C)Common law
D)Statutory law
Q2) The International Federation of Accountants (IFAC) Policy Position Paper #4 A Public Interest Framework for the Accountancy Position addresses:
A)Bribery on an international level
B)High standards of ethical behavior and professional judgment required in the accountancy profession
C)Internal control to prevent fraud
D)Corporate governance systems
Q3) The following clause was included in the engagement letter between Limits and Lobits,CPAs (L&L) and Fair,Inc.,an audit client of (L&L).
Q4) Cite specific cases to support your answer to question 1 about the differences between common law and statutory law legal liability of auditors.
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Chapter 7: Earnings Management
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69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/51861
Sample Questions
Q1) Which of the following was not true according to the Enron case?
A)Fastow developed the concept of buying up oil and gas companies to establish SPEs
B)Fastow worked to structure ventures that met the conditions under GAAP to keep the partnership activities off Enron's books and on the separate books of the partnership
C)Fastow created SPEs that borrowed money from banks and transferred it to Enron in a sale of an operating asset no longer need by Enron
D)The SPE created by Fastow enabled Enron to keep debt off its books while benefiting from transfer and use of the cash borrowed by the SPE
Q2) The Sino-Forest case centered around the:
A)Acceleration of revenue due to channel stuffing arrangements
B)Use of cookie jar reserves to manage earnings
C)Existence of assets
D)Contingent liabilities due to forestry fires
Q3) Explain what is meant by "quality of earnings" including links to earnings management and audit committee responsibilities in evaluating the quality of earnings?
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Chapter 8: Ethical Leadership and Decision-Making in Accounting
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55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/51860
Sample Questions
Q1) Accountants may hesitate to record a questionable entry if they know:
A)Internal audit is likely to detect the possible error
B)Internal audit is likely to detect the inappropriate financial reporting practices
C)Internal audit is likely to communicate it to the external auditors
D)Internal audit is likely to blow the whistle on inappropriate financial reporting practices
Q2) The Ethical Leadership Scale developed by Kelly and Early identify each of the following measures of leadership:
A)Personal ethical competence,ethical leadership,and ethical standards
B)Personal ethical competence,ethical standards,and ethical organization
C)Personal ethical competence,ethical leadership,and ethical organization
D)Ethical leadership,moral intensity,and ethical culture
Q3) Distinguish between authentic leaders,transformational leadership,followership and leadership,and servant leadership.Include in your discussion the goals of each type of leadership.
Q4) Discuss how moral intensity,organizational culture,and ethical leadership influence behavior in accounting.
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